Agent Incorporation v.s. Real Estate Personal Service Corporations

03 February 2020

One of the hottest topics within the Real Estate Community is Agent Incorporation. With the introduction of the new 'Trust in Real Estate Services Act', many agents think that this will be their answer to their tax problems. Brokerages are hoping that they are off the hook too.

Not likely, here's why.

First, we are told that this will happen in 2021. First, RECO has to figure out how sales people who are defined as employees now, will have their own company in the future. I can tell you that RECO does not want to deal with 78,000 companies instead of the 5,000 of today.

Secondly, these incorporations will be known as 'Real Estate Personal Service Corporations". Revenue Canada has already eliminated all tax advantages from Personal Service Corporations. But, OREA is hoping that ITS corporation will be treated differently. The problem is, they will have to fight for at least a year with Revenue Canada to get any ruling and probably lose. My guess, it will be 2023 before agents can hope for tax relief.

On the other hand, our Agent Incorporation is set up to be a real small business with all of the tax advantages starting today. If down the road OREA wins their case with Revenue Canada (very unlikely), then it is easy for our Agent Incorporations to be scaled back.

My question to you is, remember your clients who sold in 2007, or 2012? Who said they would buy back in after the real estate crash? Well, they are still waiting. Is that going to be you with Agent Incorporation.

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